UK manufacturing outlook darkens, retail sales slip

LONDON, Nov 19 (Reuters) - The outlook for British
manufacturers darkened on Thursday as a survey showed they
expect their output to fall, the first such prediction in three
years, while official data marked a slight decline in retail
sales in October.

A gauge of expectations for manufacturing output over the
next three months worsened to -6 from +5 in October, according
to the Confederation of British Industry (CBI), the first
forecast of a fall since November 2012.

Manufacturing, which accounts for about a tenth of the
economy, has dragged on an otherwise solid economic recovery
largely fuelled by consumers, who have been buoyed by improving
wage growth and record-low interest rates.

While retail sales volumes dropped by a slightly
bigger-than-forecast 0.6 percent on the month, the decline was
mostly expected and followed a surge in September boosted by
sales during the Rugby World Cup.

Policymakers want to see a more balanced economic recovery
that relies increasingly on manufacturing and exports rather
than services and domestic demand.

"The surveys show that the recovery is consumer-driven at
the minute, manufacturing is still struggling," said Samuel
Tombs, economist at research company Pantheon Macroeconomics.

Retail sales volumes were hurt by the biggest drop in food
store sales since May 2014, although they were still 3.8 percent
higher than a year ago and registered solid growth of 0.9
percent in the three months to October.

Tombs added that although retail sales were likely to remain
strong overall heading into the Christmas shopping season, he
expected the government's fiscal squeeze to pressure consumer
finances next year, denting sales.

Next week, finance minister George Osborne presents the
government's spending review, which will outline where the cuts
will fall as he tries to close Britain's budget deficit - one of
the largest among major economies.

The CBI said the total orders balance of its monthly
industrial trends survey rose to -11 in the three months to
November, from -18 in October, which had been the weakest in
more than two years.

November's reading was roughly in line with a forecast in a
Reuters poll of -10.

Export orders weakened a touch to -29, their lowest in
nearly three years.

The weak outlook was broad-based and the largest downward
drivers of expectations were the chemicals, mechanical
engineering and metal manufacture sectors.
(Editing by Ana Nicolaci da Costa and Dale Hudson)